Why Pay for Free Music?

Trent Reznor himself questioned the viability of the 'free' music model earlier this year, but clearly, his own band has been able to make it work. While overall album sales were down last year (even when accounting for digital downloads), bands like the Nine Inch Nails have been able to leverage their fanbase and bypass the traditional music industry channels, while still making a profit.

On the Creative Commons blog, Fred Benenson asks why people chose to pay for the NIN album even though they could have had it for free. While, as he points out, ease of use is surely one reason, most fans probably simply want to support their favorite musicians by actually paying them directly for their music.

The new album, which has ten tracks and clocks in at 43:45, is release under a Creative Commons attribution non-commercial share alike license. The band encourages downloaders to "remix it, share it with your friends, post it on your blog, play it on your podcast, give it to strangers, etc."

This begs two questions: 1. Just how many new albums does NIN have? and 2. Should all artists give away their music for free?

True Fans Theory at Work

What Reznor has done with Nine Inch Nails over the past two months is confirmation of Kevin Kelly's "true fans" theory, on a much larger scale. The theory basically states that any artist can make a living if he or she can cultivate 1,000 "true fans" -- people who will support anything the artist does. The actual number of true fans necessary to make a living will vary depending on the artist and the economics of what he or she produces.

While it is hard to find examples of this in the long tail, we are beginning to see it play out with more and more major label artists. Because Trent Reznor's true fans came through for him for the Ghosts release in March, he was able to release The Slip for free in May. At this point Reznor doesn't have to make money selling albums en masse -- his true fans will still buy the CD and and vinyl copies even though the download is free, they'll still come to his concerts and buy t-shirts and posters.

As we've pointed out in the past, this is also essentially the same theory employed by music startup Sellaband (our coverage), which asks music acts to generate $50,000 from "believers" -- usually in the form of $10 donations from 5,000 true fans. Any band that reaches that goal gets studio time to record a full album and distribution via the site and other retail channels.

However, it is still not clear whether Reznor's success can be duplicated by long tail artists. Clearly, cultivating enough die hard fans to make a living, especially while giving away your core product for free, is not easy. For Reznor it took 20 years and he had the backing of major labels along the way (Reznor's Nothing Records is owned by Interscope, which is in turn owned by Universal Music Group).

"If success for independent artists requires the cultivation of 'true fans' then awareness is paramount," we said in a March post that argued for the positive effect that putting music out for free into viral distribution channels like social networks can have for artists. But for independent artists who don't have major label backing, free might be a Catch-22. Give away tracks to build awareness and cultivate true fans, but try not to cultivate fans who expect everything to be free forever.

That's very much like the advice that Marshall Kirkpatrick gave to Reznor writing on this blog in January after Reznor complained about the download-to-pay ratio the pay-if-you-want Saul Williams album that Reznor produced received late last year. "Times are changing and if you can, it's better to work on innovating along with them than it is to make dragging your feet and suing people your business model," advised Kirkpatrick.

At the time, Reznor wrote that he was "disheartened" that just 28,322 of the 154,449 people who downloaded Williams' album chose to pay the $5 for a higher quality copy. At the same time, though, that's nearly as many as who bought Williams' previous traditional CD release in 2004 (which sold 33,897 copies) and far more who are hearing his music -- which could theoretically translate to increased concert ticket and merchandise sales. Further, because by not dealing with a label the artist is likely taking a much larger cut of the download revenue than they would receive of CD sales revenue, Williams probably made more money on fewer transactions this time around.

Clearly, Reznor was not disheartened enough to forgo trying a similar type of release for his own new album. Ghosts I-IV part I is available as a free download on the NIN site, as well as on BitTorrent. The entire album is available as a $5 download, a $10 double CD, a $75 "deluxe" package with CD, DVD, and Blu-Ray copies, and a $300 "ultra-deluxe" edition that also includes vinyl copies and signed giclee art prints. The $5 download can also be had via Amazon -- where the album has quickly shot up to the #1 spot on the sales charts.

The 9-track free edition of the album is licensed under a Creative Commons license and is free for non-commercial use. "We encourage you to share the music of Ghosts I with your friends, post it on your website, play it on your podcast, use it for video projects, etc." said the band in release notes.

Conclusions

While it is impossible to predict how this release will fare compared with previous traditional NIN releases, that may not be a fair question. The dynamics of the music industry have changed and artists like Reznor and Radiohead are blazing new trails as they attempt to figure out how to best release music under these changing market conditions. If 18.3% of downloaders pay -- as they did for Williams -- then that's probably not a bad number for NIN, who can bet that they'll get far more downloads than Williams (Ghosts is already the most downloaded torrent at The Pirate Bay) and will presumably be pocketing most of the revenue.

What do you think? Is Reznor's release a harbinger of the future of the music industry? Let us know your thoughts on the issue in the comments.